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Critics see KPMG report as ‘smoke and mirrors’

The city's service review is being critiqued as too shallow and underfunded to unearth best ways to save.

Kelly O'sullivan speaks at yesterday's rally protesting suggested cuts to the city budget, in front of a sign slyly referencing Mussolini. Demonstrators assembled in front of consultant firm KPMG's headquarters at King and Adelaide Sts.
(VINCE TALOTTA / TORONTO STAR) | Order this photo

By Robyn DoolittleUrban Affairs Reporter

Fri., July 22, 2011

With the air of a prosecutor eager to pounce, Councillor Mary Fragedakis turned to the three KPMG representatives sitting before the economic development committee.

She had some issues with their core service review suggestions.

Had KPMG considered long-term costs associated with cutting support to business improvement areas? What about the economic benefits of arts funding, social services and entrepreneurship support?

“We weren’t asked to quantify the impacts of reducing or eliminating the service,” company representatives replied.

“I don’t think that report was in the scope of what we were asked to look at.”

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“We weren’t asked to look at the implications of continuing the service.”

Fragedakis, noting a “consistent theme” to the answers, had made her point.

When finished, the city’s overall service review — for which council is paying outside consultants $3 million — is supposed to produce a map to the rivers of gravy Mayor Rob Ford says are hidden in every city department, agency, board and commission. Many expected KPMG’s reports, one of three parts in the analysis, to lead the way.

Instead, the firm’s findings, released in eight reports over the past two weeks, have been characterized by the mayor’s critics as purely political, useless, and a waste of money.

“It is a very worthwhile exercise. The city should have done it years ago. But when I heard the total budget was $3 million — well, I knew from that moment this would be a snow job,” said one affected program director.

On Thursday, 50 people protesting the process marched outside KPMG’s office in the financial district.

“I think it’s absolutely egregious that Rob Ford is paying consultants $3 million to decide which of our services we don’t need,” said 24-year-old Zoey Villeneuve.

Industry experts say KPMG, which received $350,000 and two months to complete its part of the research — one of three parts in the review — was not given the resources to do more. For the most part, the firm relied on reports prepared by city staff, some interviews with key managers and KPMG’s internal “expert panel” for intel on other municipalities, provinces and federal jurisdictions.

“Ultimately, it’s the clients who outline the scope and focus of the project,” said Glenn Yonemitsu, CEO of the Canadian Association of Management Consultants.

One prestigious international consulting firm contacted by the Star said they would not have accepted the contract.

A former Boston Consulting Group partner who now runs a training agency said that while firms typically charge public bodies significantly less, $350,000 would still make it “very hard to do” a proper analysis.

A typical rate charged by BCG for a case team is $120,000 — per week. Industry standard is that junior consultants are worth about $1,000 a day. Seniors can earn between $5,000 and $20,000.

“There is no way a city as complex as Toronto, with a budget in the billions of dollars, with so many departments, could be reviewed with $3 million. This was not an economic decision, it was a political one,” said Theodoros Peridis, an expert in strategic management at York University’s Schulich School of Business and co-director of York Consulting Group.

Real savings happen when you review processes, not line items on a budget, Peridis said. This entails following people, hundreds of interviews, and months of primary research.

City spokesperson Jackie DeSouza said this is coming. The review is being conducted in three parts: the core service study, an efficiency review and a user fee analysis. The focus of the core review was always on the “what.” The “how” component will be addressed in the efficiency phase.

The city has compiled a roster of consultants with specific expertise to tackle “deep dives” into nine city services — such as court services, facilities, parks and recreation, shelter and housing and solid waste — agencies, including the TTC, libraries and police and some across-the-board services, such as communications.

Peridis, however, estimates that a review of serious scope would take at least a year and cost $15 million.

But that type of in-depth strategy isn’t Ford’s style, he said. A shallow review of services would come up with the programs Ford has been talking about.

“You hire a consulting firm, you can say: ‘Don’t blame us. Someone from outside said it,’” he said. “This is smoke and mirrors.”

Joe Martin, director of Canadian Business History at U of T’s Rotman School of Management and a former Deloitte consultant, said the right project team could make it work with the city’s budget.

“For $2 million, competent consulting leadership would yield huge payback for the city. And I think they’re going to get something out of this,” he said.

Among the services KPMG has deemed non-core and therefore appropriate for either reduction or elimination: Riverdale Farm, recycling targets, snow windrow removal, environmental programs and social supports.

But “if they’re not examining how the budget is knit together, what’s the point?” Vaughan said.

KPMG declined to comment for this story.

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